J.T. Young writes in American Spectator, It’s About Reality, Not Austerity, 6/14/12.


A state cannot run an economy and a state-run economy cannot sustain its state. The more of its economy a government consumes, the less productive its economy becomes. And the more dependent its subpar economy then becomes on its government.

This vicious cycle creates a widening gap between what the government promises and what its economy can deliver. The government resorts to spending more, while its economy responds by producing increasingly less of the revenue needed to finance the government’s increasing spending.

The only reconciliation possible between the over-demanding government and its under-producing economy is borrowing. Once this pattern becomes firmly and deeply established, the conclusion becomes inevitable. Political oppression — as in both former and current communist countries — can temporarily extend the contradiction, but it cannot extinguish it.

Capital is mobile, while the government’s clientele is stationary — if not expanding. The “demand” stays and increases, while the “means” flees to where it is most rewarded and it takes ever increasing borrowing costs to bribe it back.

HKO comments:

The imperfections of economic systems create short term corrections which can be painful. In an effort to protect the citizens from these painful periods, and to gather their political support, the government seeks greater control of the economy. The more the economy becomes a tool for social justice by political means the more that special interests will seek political means rather than economic or market means to improve their lot.

Over time the original motive for social justice degenerates into just another special interest.  The interests of the general public suffers as the political power and the economic power is hijacked by the special interests.  The defeat of the unions in the Wisconsin recall was largely the voice of the general public reasserting itself against these parties.

Special interests are often organized and are thus courted for support, spelled MONEY, during political campaigns.  The challenge for the candidates, once elected, is to overcome the special interests and govern for the general welfare of all of the citizens.

As the state tries to control a greater share of the economy, growth stalls as capital either goes dormant or leaves for more receptive shores.  At the same time the special interests demand more from the shrinking economy.  Debt or inflation becomes the only tools left to continue the charade.  The ultimate conclusion looks like Europe today.

Reducing government’s control of the economy becomes synonymous with rejecting the demands of the special interests.